Why are the tariffs under the Trump administration not causing the inflation the economists have predicted – or causing a collapse of the economy?
It’s helpful to take a look back at how tariffs have affected the economy in the past.
In the early 1900s, the Smoot-Hawley Tariff Act – passed by Congress in 1930 and signed into law by President Herbert Hoover – triggered an immediate and intentional spike in tariffs on all imports into the United States.
The act was well-intentioned, seeking to protect domestic industries struggling to compete internationally during the Great Depression.
But the unprecedented increase in protectionist tariff policy isn’t entirely to blame for the rampant inflation during the Great Depression within the U.S. economy.
In fact, inflation never increased as a direct result of the act.